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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: AMIT SHUKLA & MS. PADMAVATHY S.
O R D E R PER : MS PADMAVATHY S. (AM)
This appeal of the Assessee is against order of Income-tax Officer, Ward014(3)(2), Mumbai passed under section 143(3) read with section 144C(13) dated 17/09/2019 for the Assessment Year 2015-16.
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None appeared on behalf of the assessee despite issue of notice through RPAD. Therefore, the appeal was heard exparte qua the assessee and is disposed off after hearing the Ld.DR and on perusal of material available on record.
The Assessee is part of the AMW Group of companies, engaged in the business of manufacturing and assembling of trucks and trailer bodies and in the manufacture of auto components. The assessee filed the return of income for A.Y. 2015-16 on 30/11/2015 declaring a total income of Rs.16,49,080/- under normal provisions and book profit of Rs.42,46,200/- under section 115JB of the Act. The case was selected for scrutiny and the statutory notices were duly served on the assessee. The Assessing Officer noticed that the assessee has entered into specified domestic transactions (SDT) with the Associated Enterprises (AE) exceeding Rs.15 crores and accordingly, made a reference to the Transfer Pricing Officer (TPO) to compute the arm’s length price (ALP). The TPO passed an order under section 92CA whereby he proposed an adjustment of Rs.1,76,27,371/-. The Assessing Officer passed the draft assessment order incorporating the TP adjustment against which the assessee filed its objections before the DRP. The Ld.DRP reduced the TP adjustment to Rs.29,10,942/-. The assessee is in appeal before the Tribunal against the final order of assessment passed pursuant to the directions of the DRP.
Before the Tribunal, the assessee raised various grounds contesting the transfer pricing adjustments on merits.
During the course of hearing, the Bench noticed that the reference to TPO is made by the Assessing Officer with respect to the specified domestics
3 ITA 6624/Mum/2019 Tranztar Commercial Vehicle Applications Ltd transactions (SDT) and, therefore, raised a question as to why the order passed by the Assessing Officer cannot be quashed for the reason that clause (i) of section 92BA have been omitted by the Statute by the Finance Act, 2017 with effect from 01/04/2017. The Ld.AR in this regard submitted that the Hon ’ ble Karnatka High Court in the case of PCIT vs Texport Overseas (P) Ltd (2020) 114 taxmann.com 568 (Karnataka) wherein it is held that resultant effect of omitted clause (i) of section 92BA with effect form 01/04/2017 has the effec6t that it had never been passed and has to be considered as a law never been existent and, therefore, the decision taken by the Assessing Officer under section 92BA(i) of the reference made to TPO under section 92CA was invalid and bad in law.
The Ld.DR, on the other hand, relied on the decision of the co-ordinate bench in the case of Maari Multi Trading Pvt Ltd vs ACIT in dated 24/02/2023 wherein the Hon’ble Tribunal has, though deleted the TP adjustment made, has remitted the issue back to the Assessing Officer with a direction to re-adjudicate the issue claim of expenditure incurred in respect of the transactions with AE and the clause (b) of sub section (2) to section 40A. Accordingly, the Ld.DR prayed for a similar direction in this regard.
We have heard the rival submissions and perused the material on record. We notice that the Delhi Bench of the Tribunal in the case of Yorkn Tech Pvt Ltd vs DICT in dated 18/08/2021 while
4 ITA 6624/Mum/2019 Tranztar Commercial Vehicle Applications Ltd considering a similar issue has discussed the various decisions rendered with respect to the impugned issue and held that - “7. We have heard the rival submissions and also perused the relevant facts arising out from the records on the legal issue raised by the ld. counsel. It is an undisputed fact that the SDT for purchase of office space as inventory was by way of Slump Sale of a going concern w.e.f. 28th March, 2016. The assessee’s case was selected for scrutiny on 21.07.2017 and reference to the TPO was made for determination of Arm’s Length Price of SDT after seeking approval of PCIT on 29.11.2018. The core argument of the ld. counsel is that, once the reference which has been made under clause (i) of Section 92BA, itself has been omitted from the statute, therefore, it is deemed that the said clause was never part of the Act and any proceedings commenced under the omitted provision cannot be enforced or action can be taken thereafter. In support, the judgment of Hon’ble Karnataka High Court has been relied upon in the case of PCIT vs. Textport Overseas Pvt. Ltd., reported in (2020) 114 taxmann.com 568 (Karnataka) and catena of ITAT Judgments cited supra, the relevant text of which have already been incorporated above. The Finance Act 2017 has omitted SDT whereby any expenditure in respect of which payment has been made or has to be made to a person referred to in clause (b) of sub-Section (ii) of Section 40. It has been omitted w.e.f. 01.04.2017. This precise issue had come up for consideration before the Hon’ble Karnataka High Court wherein the Hon’ble High Court have held that when clause (i) of Section 92BA have been omitted by the Finance Act, 2017 w.e.f. 01.04.2017 from the statute, the resultant effect is that, it had never been passed and to be considered as a law never been existed and therefore order of TPO u/s.92BA could be invalid and bad in law, While coming to this conclusion the Hon’ble High Court has referred and relied upon the judgment of Hon’ble Supreme Court in the case of Kolhapur Canesugar Works Ltd. & Anr. v. Union of India & Ors., (2000) 2 SCC 536.
8. Though, this judgment of PCIT vs. Textport Overseas Pvt. Ltd (supra) clearly clinches the issue in favour of the assessee and will apply mutatis mutandis in the present appeal also. However, we deem fit to deal with the relevant law on this point. The amendment made in the Act which has the effect of omitting a clause from the statute has to be read in light with Section 6 of the General Clauses Act. As per section 6 of the General Clauses Act, if an amendment for omission has a provision therein that pending proceedings shall continue then such a proceeding will continue. However, in the absence of any such provision in the statue or in the rule, the pending proceeding will lapse. Section 6 and 6A of the General Clauses Act for sake of ready reference are reproduced herein below:- "6 Effect of repeal. Where this Act, or any [Central Act] or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not (a) revive anything not in force or existing at the time at 29 which the repeal takes effect; or 5 ITA 6624/Mum/2019 Tranztar Commercial Vehicle Applications Ltd (b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or (c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or (d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.” [6A. Repeal of Act making textual amendment in Act or Regulation.—Where any [Central Act] or Regulation made after the commencement of this Act repeals any enactment by which the text of any [Central Act] or Regulation was amended by the express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal.
Ergo, for the purpose of present issue involved, clause (a) of Section 6 of the General Clauses Act is applicable which provides that the effect of the repeal shall not revive anything not in force or existing at the time of repeal takes effect. Section 6A provides that where any Act or Regulation repeals any enactment by which the text of any Act or Regulation is amended by express omission and unless a different intention appears, the repeal shall not affect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal. There is absolutely no saving clause while omitting (i) of Section 92BA by the Finance Act, 2017. The Constitutional Bench of Hon’ble Supreme Court in the case of Kolhapur Canesugar Works Ltd. & Anr. v. Union of India & Ors., (2000) 2 SCC 536 has observed and held as under: “37. The position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute- book as completely as if it had never been passed, and the statute must be considered as a law that never existed. To this rule, an exception is engrafted by the provisions of Section 6(1). If a provision of a statute is unconditionally omitted without a saving clause in favour of pending proceedings, all actions must stop where the omission goes into effect, it cannot be granted afterwards. Savings of the nature contained in section 6 or in special Acts may modify the position. Thus the operation or repeal or deletion or to the future and the past largely depends on the savings applicable. In a case where a particular provision in a statute is omitted and in its place another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings then it can be reasonable inferred that the intention of the legislature is that the pending proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision.”
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Thus, if a provision or statute is unconditionally omitted without any saving clause in favour of the pending proceedings, all actions must stop where such an omission is found, especially when action has been taken after the provision has been omitted. During the course of argument a reference was made to the judgment of Hon’ble Supreme Court in the case of Fiber Boards (P) Ltd., Bangalore v. Commissioner of Income Tax, Bangalore, (2015) 10 SCC 333 and Shree Bhagwati Steel Rolling v. Commissioner of Central Excise (2016) 3 SCC 643 to convass the point that the earlier judgments of Constitutional Bench in the case of Rayala Corporation Pvt. Ltd., 1970 SCR 1 (69) and Kohlapur Cane Sugar [supra] have been not followed or have been overruled. First of all, nowhere the Hon’ble Apex Court in both the judgments have overruled earlier two judgment of the Constitutional bench of the Hon’ble Apex Court rather they have explained it in detail and went on to held that the word repealed in both section of 6A and Section 24 of General Clauses Act would include repeals by expression ‘omission’ and the expression ‘delete and omission’ are used interchangeably.
However, it would be apposite to understand the judgments relied upon in terms of their facts and ratio and thereafter apply the same to the facts of the appellant. In the case of Fibre Boards (P) Ltd. Bangalore v. Commissioner of Income Tax, Bangalore, (supra) the appellant had an industrial unit at Thane which was a notified urban area. With a view to shift its industrial undertaking from an urban area to a non-urban area, it sold its land, building and plant and machinery situated at Thane and earned capital gain and claimed exemption under section 54G. Chapter XXII-B of the Income Tax Act, prior to 1.4.1988, contained section 280ZA which when read with the definition of “urban area” in section 280Y(d) and notification dated 22.9.1967 issued under section 280Y(d) by which Thane had been declared to be an urban area for the purpose of Chapter XXII- B, gave to a person who shifted from an urban area to another area, a tax credit certificate with reference to the tax payable by the company on income-tax chargeable under capital gains and would be given relief accordingly. The Appellant contended that section 54G was inserted on 1.4.1988 and at the same time section 280ZA was omitted and that therefore Section 24 of the General Clauses Act would be attracted to the notification dated 22.09.1967. That notification would inure to the benefit of the appellant for the purpose of claiming exemption under Section 54G. Section 280Y (d) which was omitted with effect from 1990, had been so omitted because it had been rendered redundant with the omission of section 280ZA. The revenue relied upon Rayala Corporation (P) Ltd. 1970 SCR (1) 639 and M.R. Pratap v. Director of Enforcement, New Delhi, (1969) 2 SCC 412 which was followed in Kolhapur Cane sugar Works Ltd. & Anr. v. Union of India & Ors., (2000) 2 SCC 536 and argued that an “omission” would not amount to “repeal” and that since the present case was concerned with the omission of Section 280ZA, section 24 of general clauses act would have no application as it only applied to `repeals’ and not ‘omissions’, and also that it saved rights that were given by subordinate legislation, and as the notification dated 22.9.1967 did not by itself confer any right on the appellant, section 24 of the General Clauses Act would not be attracted. 11.1 The Apex Court in the case of Fibre Boards (supra) was of the view that there is no need for the later enactment to state in express terms that an earlier enactment
7 ITA 6624/Mum/2019 Tranztar Commercial Vehicle Applications Ltd has been repealed by using any particular set of words or form of drafting but that if the legislative intent to supersede the earlier law is manifested by the enactment of provisions as to effect such supersession, then there is in law a repeal notwithstanding the absence of the word ‘repeal’ in the later statute. Repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would be covered by the expression “repeal” in Section 6 of the General Clauses Act. All that is required is that an intention to abrogate the enactment or portion in question should be clearly shown. 11.2 The Apex Court held that the idea of omitting section 280ZA and introducing Section 54G on the same date was to do away with the tax credit certificate scheme together with the prior approval required by the Board and to substitute the repealed provision with the new scheme contained in Section 54G.Once Section 280ZA is omitted from the statute book, section 280Y (d) having no independent existence would for all practical purposes also be “dead”. On this reasoning, the Apex Court decided in favour of the appellant by holding that omission of section 280ZA and its re-enactment with 34 modification in section 54G, section 24 of the General Clauses Act would apply, and the notification dated 22.9.1967 would be continued under and for the purposes of Section 54G. 11.3 The Apex court while rendering its decision in the aforesaid case held that in Rayala Corporation, what fell for decision was whether proceedings could be validly continued on a complaint in respect of a charge made under Rule 132A of the Defence of India Rules, which ceased to be in existence before the accused were convicted in respect of the charge made under the said rule. It stated that once it is held by the constitution bench in Rayala that section 6 itself would not apply, it would be wholly superfluous to further state that on an interpretation of the word “repeal”, an “omission” would not be included and therefore the second so- called ratio of the Constitution Bench in Rayala Corporation cannot be said to be a ratio decidendi at all and is really in the nature of obiter dicta. The Apex Court was of the opinion that the word “repeal” in both section 6 and section 24 would include repeals by express omission. An implied repeal is covered by the expression “repeal” and repeals may take any form and so long as a statute or part of it is obliterated, such obliteration would be covered by the expression “repeal” in section 6 of the General Clauses Act. The Apex Court also stated that there is no reference to Section 6A of the General Clauses Act in either of these Constitution Bench judgments (Rayala Corp (supra) and Kolhapur Cane sugar Works Ltd. (supra)) and the absence of any reference to section 6A, therefore, again I.T.A. undoes the binding effect of these two judgments on an application of the ‘per incuriam’ principle.
Same view has been reiterated by the Hon’ble Supreme Court in the case of Shree Bhagwati Steel Rolling v. Commissioner of Central Excise, (2016) 3 SCC 643. In this case, the appellant took a rolling mill on lease from 1997 to 2000 and manufactured rerolled non-alloyed steel products. On 1.9.1997 the compounded levy scheme was introduced by insertion of section 3A of the Central Excise Act. The appellant opted for the aforesaid scheme under Rule 96ZP of the Central Excise Rules. When the lease expired, the appellant surrendered its registration certificate on 1.6.2000. Section 3A was omitted in 2001. On 19.8.2005 notice was issued to the appellant demanding
8 ITA 6624/Mum/2019 Tranztar Commercial Vehicle Applications Ltd interest for delayed payment of central excise duty under section 3A of the Central Excise Act for the period 1997 to 2000. 12.1 The question framed before the Hon’ble High Court was whether “omission” of the compounded levy scheme in 2001 wipes out the liability of the assessee for the period during which the scheme was in operation. The Hon’ble High Court held that on omission of section 3A, the liability of the assessee was not wiped out. 12.2 The appellant contended that there is a fundamental distinction between “repeal” and an “omission”, in the case of a “repeal” the statute is obliterated from the very beginning whereas in the case of an “omission” what gets omitted is only from the date of “omission” and not before. This being the case, it is clear that things already done in the case of an “omission” would be saved. However, a “repeal” without a savings clause like section 6 of the General Clauses Act would not so save things already done under the repealed statute. He further argued that “repeal” is normally used when an entire statute is done away with, as opposed to an “omission” which is applied only when part of the statute is deleted. The appellant further contended that section 6A which was relied upon in Fibre Board’s case did not state that an “omission” would be included within the expression “repeal”, but that if section 6A were carefully read, an “omission” would only be included in an “amendment” which, under the section, can be by way of omission, insertion or substitution. Therefore, it is fallacious to state that section 6A would lead to the conclusion that “omissions” are included in “repeals” and for various reasons Fibre Boards requires a relook and ought to be referred to a larger Bench of three Judges. The appellant further contended that the true ratio decidendi of the Constitution Bench decision in Rayala Corporation is that an “omission” cannot amount to a “repeal”. 12.3 The revenue supported the judgment in the Fibre Board’s case. 12.4 The Apex Court held that when section 6 of the General Clauses Act speaks of the repeal of any enactment, it refers not merely to the enactment as a whole but also to any provision contained in any Act and if a part of a statute is deleted, section 6 would nonetheless apply. The Apex court referred to Fibre Board (supra) wherein it is stated that the expression “omission” is nothing but a particular form of words evincing an intention to abrogate an enactment or portion thereof. I was held that the expression “delete” and “omit” are used interchangeably, so that when the expression “repeal” refers to “delete” it would necessarily take within its kin an omission as well. It was further held that there is no substance in the argument that “repeal” amounts to an obliteration from the very beginning, whereas an “omission” is only in futuro. 12.5 The Apex Court was of the view that when the court referred to section 6A in Fibre Board’s case and held that section 6A shows that a repeal can be by way of an express omission, obviously what was meant was that an amendment which repealed a provision could do so by way of an express omission. Hence section 6A undisputedly leads to the conclusion that repeal would include repeal by way of an express omission. The Apex Court arrived at the conclusion that an “omission” would amount to a “repeal” for the purpose of Section 24 of the General Clauses Act. Since the same expression, namely, “repeal” is used both in Section 6 and Section 24 of the General Clauses Act, the construction of the said expression in both sections would, therefore,
9 ITA 6624/Mum/2019 Tranztar Commercial Vehicle Applications Ltd include within it “omissions” made by the legislature. 38 12.6 The Court was also of the view that merely because the Constitution Bench in case of Rayala Corporation referred to a repeal not amounting to an omission this would not undo the effect of decision in Fibre Board’s case and the statement of the law in Rayala Corporation is no longer the law declared by the Hon’ble Supreme Court after the decision in the Fibre Board’s case. Fibre Board (supra) is a recent judgment which clarifies the law in holding that an omission would amount to a ‘repeal’.
The converse view of the law led to an omitted provision being treated as if it never existed, as section 6 of the General Clauses Act would not then apply to allow the previous operation of the provision so omitted or anything duly done or suffered thereunder. Nor may a legal proceeding in respect of any right or liability be instituted, continued or enforced in respect of rights and liabilities acquired or incurred under the enactment so omitted. Hence, section 6 would apply to omission of section 3A.
Further, it is a very well recognized rule of interpretation of statutes that where a provision of an Act is omitted by an Act and the said Act simultaneously re-enacts a new provision which substantially covers the field occupied by the repealed provision with certain modification, in that event such re-enactment is regarded having force continuously and the modification or changes are treated as amendment I.T.A. No.635/DEL/2021 39 coming into force with effect from the date enforcement of the re-enacted provision.
The issue for consideration before us is clause (i) of Section 92BA which has been omitted from 01.04.2017 and there is no re-enactment with modification or any Saving Clause in any other Sections of the Act. Thus, without any Saving Clause or similar enactment, then it has to be held that Clause (i) of Section 92BA did not come into operation whenever any action has been taken especially after such omission. Accordingly, we hold that no Transfer Pricing Adjustment can be made on a domestic transaction which has been referred to by the Assessing Officer after the omission of the said clause by the Finance Act, 2017 even though transaction has undertaken in the Assessment Year 2016-17.
Further, our decision is equally fortified by the judgment of ITAT Kolkata Bench in the case of M/s. Raipur Steel Casting India (P) Ltd. vs. PCIT which pertained to the Assessment Year 2014-15, and catena of other judgments as relied upon by the Ld. Counsel of the assessee cited extenso in the foregoing paragraphs.”
We also notice that the co-ordinate bench in the case of Maari Multi Trading Pvt Ltd vs ACIT (supra) has also deleted the TP adjustment by relying on the decision of the Hon’ble Karnataka High Court in the case of PCIT vs Texport Overseas (P.) Ltd (supra). With respect to the contention that the issue should be remitted back to the Assessing Officer to examine the impugned addition from the perspective of section 40A(2)(b), we notice that 10 ITA 6624/Mum/2019 Tranztar Commercial Vehicle Applications Ltd the Assessing Officer, considering the volume of SDT has made the reference to the TPO and has not recorded any adverse finding with regard to the impugned transactions. We, therefore, see no reason to remit the issue for re- examining the impugned transactions from the perspective of section 40A(2)(b) and accordingly we see no merit in the claim of Revenue.
9. Since we have allowed the appeal in favour of the assessee based on the legal ground, the grounds raised
with regard to the merits of the case have become academic and does not warrant any separate addition.
10. In the result, appeal of the assessee is allowed.